GP of the year? They 100x LPs money by turning $8m into $800m

Quick note before we dive in…

The absolute hardest thing of the past two years:

Convincing a group of traditional business owners in their 50s and 60s to sell their life's work to a 30-year-old while them financing 40-50% of the deal.

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That said…

When used well, Twitter can be the poor man's MBA, Ivy League School, whatever you want to call it.

One thing is education.

My personal favorite is the experience.

Take the people who are building very large businesses , investment firms, holding companies.

Also the founders of multi-billion dollar companies, finance guys, world class analysts or investment professionals, presidents of NBA clubs, etc.

They are all there.

You can see how they think, as someone posting on Twitter doesn't hold back.

Their investors, partners, employees are watching and reading.

They only post things that make sense and provide value.

Your job is to learn and APPLY.

You see something, you learn something.

You then go and do it.

Next… networking.

It gives you access to those RIGHT people who are DOING stuff.

Or the opposite, when they are following you and then reaching out introducing themselves.

Following them for a while, reading their written thoughts; then jumping on a call it looks like you've known them for a while.

Or vice versa, if they follow you and reach out to introduce themselves.

So, whatever you do, or build – there are people watching.

Get to know them, trying going from online to offline.

Travel if needed.

I've traveled across Europe to meet people (and soon the US too).

Do what you gotta do to meet these people IRL.

Because whenever you need advice or a bit of help – they’ll be your guidance, and the so-called poor man's MBA.

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It's been one of the hardest things I've tried (yet I wouldn't change a thing), so this is a little thank you post to those who have helped and watched the progress over the past two years.

It's been great so far.

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Have you read the short story PageNet?

The GPs invested $8 million in the company and made about $800 million for their LPs after they were sold.

As the GPs put it: "It was a big enough return to put our firm on the map."

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Who would have thought. PE firm with $25b aum achieving major successes from minority stakes.

“Unlike major private-equity firms, which insist on majority ownership of their portfolio companies, we have a wealth of experience taking minority stakes in companies and helping transform their strategies even though we cannot exert the typical majority ownership controls.”

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When walking outside, or driving around your city — look around you.

There are so many companies run by gentlemen older than 50, 60 or even 70; and they have really strong businesses that they've built over a long period of time.

They've been through several market cycles, several crises, but they're still here, some very profitable with a great team.

IMO just seeing this should get operators, investors and capital allocators very excited.

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The wild part of US and SBA loans is the IRR and MOIC returns of some of the success stories.

There is an extremely smart young man who acquired a traditional $10M business with a long history and today owns the majority of it, 70%.

Even if the company stays the same and things go according to plan, which they have so far, he will make many millions if he decides to sell the company after the loan is paid off.

His investment was $40,000

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If you are ever considering starting an investment firm, I highly suggest you read Graham Duncan's letter to a friend.

(Sage advice from someone who started his fund at 31 and today manages a $2b fund himself.)

Here are few ideas from his masterpiece:

1.  Life is too short to be paralyzed by the threat of a mixed reference – some of the most revered investors in the world today were at best damned with faint praise when they left their old firms.

2.  Your job is to accelerate the process of building trust with people who don’t know you.

3.  Having wealthy friends and colleagues? Speak to them, and get them to wire cash into your investment partnership.

4.  Wearing a suit to a meeting is one signal we send to people that we’re telling the same story about business and money.

5.  Good hiring is critical: the people around you will either protect or infringe on the climate within your skull.

6.  It’s very hard to own somatically (as opposed to cognitively) in advance of what it feels like to lose money for other people.

7.  GPs are often mismanaging their own anxieties. So your job is to protect your psychology in advance, so prepare yourself for innocent clumsiness by your LPs.

8.  It’s the manager’s decision to make the right calls for the portfolio … not the investors

9.  Before starting something new – spend time alone for several weeks with a blank sheet of paper

10.  Give yourself enough time to build a positive vision of a future fund instead of simply reacting against someone else’s vision or your own prior frustrations.

11.  Money is like gasoline while driving across the country on a road trip. You never want to run out, but the point of life is not to go on a tour of gas stations.

It's so good that I decided to record the episode by reading it out loud.

Links to Spotify and Apple Podcast.

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Acquiring a boring niche manufacturing company?

Go and run the machine for an hour a day with the machine operator. Understand what they do. Understand what it's like to be in their shoes.

1. It's a great way to learn business;

2. A great way to build trust with people who have been through the process of selling the business and are now being part of the new owner, operator group.

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How has been the week in my small holding company world?

Traditional businesses

Spoke with a small fund manager who invests in traditional businesses.

"Very happy about our two recent acquisitions. I see these to be the past, the present and the future."

Me: What? Why??

Cow farms.

Additional information about the deal I’m pursuing:

The $12mm heavy equipment seller and rental company I’ve talked about – two weeks ago another buyer joined the conversation, but they said this guy is 20-25 years older than me.

They don't like it, although he is willing to pay more and with better terms (mostly cash compared to my complex structure of A and B shares and property sale leasebacks).

I received more information today, I will do the calculations with a fund manager who is generous enough to guide me tomorrow evening and then make a new offer.

I will share an update next week.

Fintech/Consumer loan company

November is always the busiest because of Black Friday and the general start of a shopping season. It always slows down in December.

Three great news:

1. We’ve had a strategic buyer interested in acquiring the company for around 6 million euros and until today we were actually considering it because of how difficult it has been to raise the debt. Not anymore…

2. Finally, we secured 10 million euros of debt-financing for the next two years from a Lithuanian credit fund.

3. In addition, to get access to retail investors, we built an investment product where instead of holding cash on their bank account, they can keep it on Modena’s back account while earning a ‘second salary’ (from 50 dollars; 8-10% interest with monthly payments; and if they want to withdraw, they can do it with 30 days notice).

   Link to Modena Capital: https://modena.capital/

This is how it looks like, daily payments directly to their bank account:

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This week’s podcast:

If you are ever considering buying a business, I encourage you to listen to Ryan's story.

A risk-averse corporate employee who started acquiring companies in the late 40s

• 6 acquisition in 4 yrs

• $80M in sales with $8M EBITDA

• Happy AF

Trust me, it doesn't get any better.

Something that amazes me almost weekly…

A gentleman roasting a HUGE bull on a steel spit gets 38 million views.

Gentleman shares step-by-step how he quit a high-paying W-2 job to acquire 6 brick-and-mortar businesses and grow them to $80M in revenue. 307 views.

I can't believe my eyes.

Here are the links to Spotify, YouTube and Apple Podcast.

That’s all for today.

Thanks for reading and talk to you again next week.

Take care,

PrivatEquityGuy / Mikk Markus